<p>With the down housing market, and the cost of repairs to prepare for sale exceeding the amount one will get for a sale, I wonder if people are either selling their house just for the price of the lot, or, if they have moved on, demolishing their house and just selling the vacant lot.</p>
<p>I know a lot of people after Katrina demolished their damaged homes and sold their lot, walking away with their insurance proceeds to buy a new home. A good friend was even able to retire, as she was paying insurance on three inherited homes that were demolished in the flood. She got a nice insurance settlement and no longer has insurance payments on those properties, so she was finally able to stop working and take her SS.</p>
<p>In the event of husband being transferred to another city, (my lips to God’s ears), I wonder if this would be the way to go with our house. It is paid for, but would require at least 70K in updates: new kitchen, two new baths, all new floors, new concrete work, and extensive landscaping. We have a nice sized lot in a good school district, nice, safe neighborhood. </p>
<p>I wonder, would it be cheaper for a buyer to just take our lot and build a new home, or would it be cheaper for them to take the existing home, gut it, and do a complete renovation? Either way, the landscaping will have to be done, so demolish or not, that will still be an issue.</p>
<p>I would think it depends on your region. We are in CA, central coast area. Beautiful one acre lot and our home was a custom home built in the late sixties. We have done a lot of work it bits and pieces but someone will likely eventually buy it and gut the bathrooms and kitchen again. BUT there are no vacant lots in our neighborhood and our neighborhood is desirable. So no one is going to buy a vacant lot they will have to buy an existing house and then decide. The homeowners insurance around here is always funny too because the lot is worth way more than the house.</p>
<p>No brainer for us; I know our house will be a tear down. Our town at one point was called the tear down capital of the country; highly desirable commuter suburb with excellent schools and no new land. And like you, our house would need many $$ to even get it livable. I can’t believe we still live in it; would never expect anyone else to!</p>
<p>In our town, they do not renovate, they tear down and rebuild. The only reason they wouldn’t do this is if they want to keep some kind of variance with the existing property, like set back or something else I don’t really know about. Then they might keep a corner of the old home. But it’s still essentially a new house.</p>
<p>It has been this way all along; don’t think the economy changed this; just who can afford to buy at all. We actually got a cold call letter from a realtor (as did our neighbor) whose sister is looking for a lot to build. Guess they could tell our house was a goner! Although we do want to sell and relocate, my husband refuses to initiate anything until he has a needed hip replacement, which he hasn’t even started planning. Grr.</p>
<p>Montegut – since your house is currently habitable, you should not even remotely consider demolishing the house and selling the lot simply because land financing is less readily available than financing for an existing home (even if it needs $70K in renovation). </p>
<p>Land loans are pricey and typically require 30% down, which means you narrow your pool of potential buyers. You will get a better price and/or more attractive offers from buyers if mortgage money is available.</p>
<p>Even if the house is unlivable, I would not rush into demolishing it. There is a huge difference in getting permits for new construction vs utilizing an existing foundation (“remodel”). I see folks on my street gutting out their homes down to the foundation and building what are basically new homes with an old footprint.</p>
<p>Oh, I’m not doing anything yet! But, if the situation arises in the near future that husband is asked to relocate, I don’t want to take a mortgage out on the now paid-off house to do repairs, and then have a new mortgage on a new house in the new location. We’ve worked very hard to pay off the house by the time son started college, and I would hate to take on two mortgages in our empty nest years.</p>
<p>Even though this is a what-if scenario, I am so glad I posted this, so I will be prepared for even wanting to downsize once son graduates from college. I didn’t know there were so many factors involved like land loans and permits. You guys are a wealth of knowledge! Thank you! And keep it coming!</p>
<p>Decades ago, my architect brother went independent and to get started, they in essence flipped houses. They literally tore down three walls and rebuilt the house. As others have said, permitting and financing were the main reasons.</p>
<p>Plus, if you any loan on your existing house, your lender may have strong objections to your tearing down the security to the loan (even if 90% of the value is in the lot). The only reason I would consider tearing down a house I owned and trying to sell the land is if 1) The house is unsalvagable and economically obsolete (and this means more than needing a bathroom and kitchen re-do) and 2) I could tear the house down less expensively than a new buyer could (by doing it myself, for example).</p>
<p>As others have said, in almost every other circumstance it makes sense to keep even a lousy run down house on the lot, both for loan and zoning/building permit purposes.</p>
<p>If there is a mortgage on the property, then the owner can’t demolish the home without approval from the mortgage-holder. To the mortgage-holder (the bank) the home as some value and it can’t be destroyed.</p>
<p>A buyer could only do so if they either pay cash or their lender understands what’s going to happen and the mortgage is for the land value only.</p>
<p>Where I live there is a limit on the allowable new house size. If an existing home is over that limit though, you can retain that size even in a totally new house if you stick to the existing footprint. So you could potentially lose a lot of square footage if the old house was torn down before you started the permit process for the new place.</p>
<p>On the other hand, a friend of mine is tearing down a house she owns in Florida because it has tons of mold. She thinks she’ll be able to sell it (the land) more easily without that issue. Hope she’s right.</p>
<p>The “Little Couple” on TV bought a teardown for their new house in Houston. It was very common in better neighborhoods all over the US to see smaller homes sell for the lot and torn down. Maybe slowed down now but a good exit strategy if you have a smaller house in a highly desirable neighborhood in a desirable city.</p>
<p>It WAS common in Atlanta area for many years, but right now, it seems much less so. Why? Because nearly new houses, many of which were houses built on tear down lots, are on the market, often for less than they cost to build. So, it is hard for a builder to make a profit on a tear down rebuild.</p>
<p>It’s funny that you mention this because when I was looking at houses I saw one house (a teardown) on an otherwise great lot. It was selling for really cheap too… but by he time I factored in the money to build a house on it as well as the time it would take to build a house on it, I decided it wasn’t worth it to me. I always thought it would be nice to build a house exacly the way I want it… there was my chance I guess, lol!</p>
<p>Montegut…you can always sell a home “as is”. </p>
<p>You shouldn’t bother to incur any expenses to do at “tear down”…if a buyer wants to that, then let him do. Doing such is expensive.</p>
<p>But, if the situation arises in the near future that husband is asked to relocate, I don’t want to take a mortgage out on the now paid-off house to do repairs, and then have a new mortgage on a new house in the new location. We’ve worked very hard to pay off the house by the time son started college, and* I would hate to take on two mortgages in our empty nest years.** *</p>
<p>But…something you wrote I don’t understand. If you were to take out a mortgage on this home in order to pay to “fix it up” and sell, then you wouldn’t have 2 mortgages when you moved…unless you purchased a new home before selling the old one. If you sell and then move, that THAT “repair mortgage” will be paid off. You can’t sell the home and keep the mortgage…it has to be paid off. </p>
<p>anyway…I don’t know the condition of your home, but it may not require a “mortgage” to fix it up enough to sell it. Paint and new carpet don’t rise to the level of a mortgage. </p>
<p>Since your son is in college on practically a free ride, why not use the money that you would have been paying for a monthly mortgage payment and son’s Jesuit tuition and put it towards some of these repairs? It would seem that much of these repairs could come out of current income.</p>
<p>I’m probably using the wrong term by saying mortgage. Maybe the appropriate term is “home equity loan”? If your house is paid off, and you take out a loan to do repairs, and then sell the house, do you have to pay off that “home equity loan” as part of the sale? No matter, that’s what we would want to do.</p>
<p>Oh, I wish the free ride to college would offset the Jesuit tuition enough to do repairs. We had hoped to at least get our sidewalk redone with the “Jesuit money”. Unfortunately, the economy and major car repairs took care of that “windfall”.</p>
<p>While the repairs are not going to cost as much as a full blown mortgage, they will cost much more than a new car, or two, and we’d be hard pressed to even do a new car note right now in the current economy.</p>
<p>Funny there was mention about the college choice giving rise to freeing up money for home repairs. Our neighbor down the block, whose son also attended a private Catholic college, when his son went away to the state flagship on a full scholarship, gutted his whole house, moved in with his sister in law for a whole year, and redid the whole place. I was waiting for the For Sale to go up. But no, he just took the opportunity to do much needed repairs.</p>
<p>It’s much easier to do home repairs when you know how to do them yourself and you have a place to stay for little to no money while they are happening. ;)</p>
<p>I’m probably using the wrong term by saying mortgage. Maybe the appropriate term is “home equity loan”? If your house is paid off, and you take out a loan to do repairs, and then sell the house, do you have to pay off that “home equity loan” as part of the sale? No matter, that’s what we would want to do.</p>
<p>Yes…because that Home Equity Loan is like a lien against the property. you’re getting that lower rate because the home is collateral. I believe that the interest is deductible. </p>
<p>I would find some recommended construction workers (or firemen!) who do these kinds of jobs on the side and pay as you go along…or take out a line of credit if needed. There’s a lot of good people looking for work, and you may find people who will do the work for a fair amount of money. </p>
<p>Unless the sidewalk is in seriously bad condition, I would put my money towards the home’s interior. Any exterior repairs should be limited to things like paint and some landscaping (flowers and such).</p>
<p>The sidewalk has to come first, as we have lots of kids in the neighborhood, and our sidewalk is a good three inches below the neighbors. We worry about kids getting hurt riding their bikes. We got a quote from a guy who did emergency kitchen repairs for us this year, and it was way out of our budget. We also need mud, lots of mud. We live in an area that sinks, and we haven’t done a major fill since Katrina, six years ago. These alone will cost at least 20K. Oh, and then there’s major tree trimming of our two beautiful oak trees, which will probably cost a few thousand. Without the tree trimming, the new grass that will have to be planted after the new mud will not grow.</p>
<p>See how it becomes a vicious cycle? Mud, sod, tree, concrete. Then there’s nothing left for the new bathroom and new floors.</p>
<p>Oh, that tearing down idea is looking better and better. If I didn’t have my cats, I’d seriously consider moving to an apartment.</p>
<p>House sinking? In Florida, insurance policies have sinkhole coverage. It’s kind of a racket in Florida where anyone who has the the slightest settling crack in their house hires a sinkhole lawyer who goes for the full face amount of insurance coverage on your house insurance policy. Lots of people in Florida got big checks for total losses and got to keep the house and lot to boot–nice way to pay off mortgage or have money to repair house or put money in your pocket.</p>